Angie's List: Should You Pay Your Contractor With Paper or Plastic?

Angie's List is the nation's leading provider of consumer reviews on local service companies and doctors. (PRNewsFoto/Angie's List) Facebook Twitter Pinterest

Angie's List is the nation's leading provider of consumer reviews on local service companies and doctors. (PRNewsFoto/Angie's List)

INDIANAPOLIS, March 16, 2012 /PRNewswire/ -- The question of plastic or paper isn't just for the grocery any store. More and more contractors are accepting credit cards, and that's the smartest payment choice for consumers.

"Consumers get the most protection from credit cards, but most homeowners are still whipping out their checkbooks when it comes time to pay the plumber, landscaper or roofer," Hicks said. "Part of this is because in the past, many contractors didn't offer credit card payment, but that's changing."

In a March 2012 poll of companies graded by consumers on Angie's List, 65 percent of respondents said they accept both debit and credit card payment. In 2010, 57 percent of companies answering a similar poll said they accepted credit and debit cards.

20 percent of the companies said they preferred credit card payment. That's up from 12 percent in the 2010 poll.

"Many highly qualified and reliable companies still aren't equipped for credit card payment, though, and unless consumers insist on credit card payments, this shouldn't be a large factor in determining who to hire," Hicks said. "But payment options and payment terms are an important discussion point in the hiring process, so be prepared to talk about how you will pay well before you decide."

Hicks strongly recommends that consumers stagger payment for home improvement projects that will take weeks or months to complete, tying payments to progress on the job.

If paying by check, Hicks reminds consumers to describe what the payment is for in the memo section of the document, keep a copy for your records, and in all cases, keep receipts.

"What you absolutely should not do is pay in cash," Hicks said. "With cash, you have no paper trail should thing goes wrong, and if a contractor is insisting on cash, that's a red flag."

In a recent Angie's List member poll, 37 percent of respondents said they have paid a contractor in cash, and 12 percent of them paid the full cost up front. In those cases, more than half the consumers said their contractor never finished the job. 80 percent of respondents to a recent Angie's List member survey say they usually pay for home improvement by check.

Payment Options:

Credit cards are the safest and most flexible option for consumers.

Payments can be organized into a schedule throughout the course of the project through automatic payment.

Each transaction creates a paper trail showing payment history.

Withdrawal from your bank accounts is delayed, and can be stopped before processing should something go seriously wrong with the job.

Some contractors will add credit card processing fees to the project costs. Others absorb it as part of doing business.

Checks are the more traditional form of payment and when properly used are safe forms of payment but less flexible than credit cards.

Payments can be organized into a schedule but require a check to be written and recorded.

The check itself is a paper trail showing payment history, but be sure to detail the purpose of payment in the memo section of the check, and write the check to the company – not to cash.

Withdrawal is immediate from your bank account and stopping payment should something go wrong on the job will require you to pay fees to the bank.

Debit cards do not offer the same consumer protections as a credit card.

Payments can be organized into a schedule but require the card to be used each time, and consumers should record the transaction and keep a copy of the receipt.

Federal law does not give debit cardholders the right to stop payment for merchant disputes. Consumer protection options vary widely by the issuing bank or institution, so be sure you understand those that apply to you.

Withdrawal is immediate from your bank account and stopping payment should something go wrong on the job will require you to pay fees to the bank.

Cash offers no protection to consumers.

Angie's List members experience show and the Federal Trade Commission cautions that contractors whose only payment option is cash are not as reputable as those who have other payment options available.

Contractors who insist on cash payment may not have the financial ability to complete your project and may be using the money for things other than your project.

Angie's List collects consumer reviewsand helps connect consumers with the best local service providers in areas from home improvement to health care. More than 1 million households across the U.S. and Canada subscribe to and rely on Angie's List to help them make the best hiring decisions in more than 550 service categories. Members get unlimited access to local ratings via Internet or phone, exclusive discounts, the Angie's List Magazineand help from the Angie's List complaint resolution service. For the latest consumer news, visit the Angie's List newscenter.